Art Pulaski: Enterprise zones boondoggle

The idea behind the state's enterprise zone tax credit program is a good one: provide incentives to businesses in economically disadvantaged areas to create jobs. Unfortunately, good ideas don't always translate to good policy. In the years since its inception, the enterprise zone program has morphed into a bloated mess of wasteful government spending that is doing little to nothing to create jobs.

The Public Policy Institute of California released a study in 2009 finding that enterprise zones have "no statistically significant effect on either employment levels or employment growth rates." In addition, the California Legislative Analyst's Office has issued several reports concluding that enterprise zones don't create jobs, finding the program is "expensive and not strongly effective."

The enterprise zone program costs the state $700 million a year currently and is growing by more than 35 percent annually. The program simply isn't a good return on the investment taxpayers are making.

While the state has made significant jobs gains in the last few years, we're still far short of full employment. Our high unemployment rate is bad news for businesses and the millions of workers who are still searching for a job. There's no question that government bears some responsibility to improve the jobs climate. Investments in infrastructure, technology and education make California more attractive to business growth and job creation.

Tax credits can also make California more competitive, if done properly. But when a wasteful government program like enterprise zones picks winners and losers, takes money out of our schools, encourages low-wage hires over middle-class jobs and does nothing to provide incentive to create new jobs, we call that a boondoggle. And it's a boondoggle at taxpayer expense.

Despite all the evidence of the program's failures, proponents say efforts to reform this wasteful program are "anti-business." That's nonsense. Every tax break program should be accountable. If a program isn't fulfilling its intent of creating jobs, the state should find a better way to use those resources to spur hiring. California has many business tax credits. Some, like the Hollywood film tax credit, create and retain jobs. We know that because the Hollywood tax break is reviewed for effectiveness before it is extended.

With enterprise zones, there's no such review. Transparency is a major problem with the program. There's very little information available to the public on the program's effectiveness. What we do know is that 61 percent of the hiring credits were given to corporations with more than $1 billion in assets. And many of those companies, like Walmart and Taco Bell, pay their employees so little that those workers end up on public assistance. That's a double whammy for taxpayers.

Despite its problems, the enterprise zone program can be fixed. State Sen. Jerry Hill introduced legislation (SB 434) that would make enterprise zones more transparent and accountable to their intended purpose of creating good jobs. It's essential that the legislature pass this bill this year. California cannot afford to continue wasting taxpayer dollars on ineffective programs that do little to boost job creation.

Every tax break must be put to the jobs test. If a program creates good jobs, we should keep it or expand it. If it doesn't, we must reform or eliminate the program. That's commonsense to taxpayers who demand our dollars are spent wisely. Hopefully that commonsense prevails in Sacramento this year and we get much-needed reform to the broken, wasteful enterprise zone program.

Art Pulaski is the executive secretary-treasurer and chief officer of the California Labor Federation.

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